Archive for April, 2009

U.S. markets still vulnerable to shock: bankers (Reuters)

Wednesday, April 29th, 2009 | Finance News

BEVERLY HILLS, Calif (Reuters) –
U.S. financial markets are stabilizing as data suggest the recession's worst may be over, but a surprise event like a flu outbreak or fresh bank troubles could send them tumbling anew, bankers and analysts said on Wednesday.

"The market is still on pins and needles," said Rebecca Patterson, a managing director and the Global Head of Foreign Exchange and Commodities at J.P. Morgan Wealth Management.

"It would not take a lot right now to tip us back into a weaker place," she said at the Milken Institute Global Conference.

Financial markets reacted calmly to news this morning that the U.S. economy contracted sharply in the first three months of the year as gross domestic product shriveled at an annual rate of 6.1 percent.

Economists at big banks expect the economy to keep shrinking in the current quarter, but some signs including news that consumer spending recovered somewhat in the first quarter suggest the worst of the decline may be over.

Still, it is too early to call an all-clear for financial markets, bankers and analysts warned.

U.S. unemployment is expected to keep rising and investors still worry about problems the unknown.

"We live in a more volatile world than we like to admit and the market continues to not adequately factor in possible disasters," said David Solomon, a managing director and co-head of Goldman, Sachs & Co.'s investment banking division.

The potential difficulties range from fresh problems with Pakistan, new issues for U.S. banks, or an international health crisis.

"What worries me most is surprise government action," said Meredith Whitney, a banking analyst credited with seeing how vulnerable banks were long before anyone else did.

The government's track record on announcing new stimulus plans has been mixed, with markets often tumbling when yet another program was unveiled earlier this year.

Next week, results of the so-called stress tests in which U.S. government examiners reviewed the books of more than a dozen large U.S. banks are expected to become public.

Bankers worry that fresh liquidity problems at big banks, requiring more government financial aid, could unnerve U.S. taxpayers and weigh on markets. They also worry that too little information about which institution is doing well and which isn't might lead to speculation that could undermine markets.

"If banks can't heal with time and they do need more money, that could create a lot of uncertainty," J.P. Morgan's Patterson said.

And more immediately, bankers raised concerns about how a possible swine flu pandemic might affect markets.

The White House has asked Congress to free up $1.5 billion to deal with the disease as more cases are confirmed across the United States.

(Reporting by Svea Herbst-Bayliss, editing by Gerald E. McCormick)


Buffett’s Berkshire Hathaway delays results (Reuters)

Wednesday, April 29th, 2009 | Finance News

NEW YORK (Reuters) –
Warren Buffett's Berkshire Hathaway (BRKa.N) (BRKb.N) will not report first-quarter earnings on Friday as expected, said a spokeswoman.

The Omaha, Nebraska-based conglomerate was to have reported the results, ahead of its annual investor meeting that draws thousands of shareholders.

The spokeswoman said no new date had been fixed for the earnings release, and could not give a reason for the delay.

(Reporting by Lilla Zuill, editing by Leslie Gevirtz)


Time Warner beats Street, eyes AOL spinoff (Reuters)

Wednesday, April 29th, 2009 | Finance News

NEW YORK (Reuters) –
Time Warner Inc (TWX.N) posted a stronger-than-expected quarterly profit, as a rise in cable network revenue helped offset declines in advertising sales at its AOL Internet and Time Inc publishing units.

Shares of the company, the first of the big U.S. media conglomerates to post results, gained 3 percent on Wednesday, after it also affirmed its 2009 outlook and said it anticipates spinning off one or more parts of AOL.

Other media stocks, including Walt Disney Co (DIS.N) and Viacom Inc (VIAb.N), also rose, with investor sentiment helped by government data that showed U.S. consumer spending increased in the first quarter.

Chief Executive Jeffrey Bewkes is trying to turn Time Warner back into a traditional media company consisting of cable networks like HBO, CNN and TNT, the Warner Bros film studio, and publishing units.

Bewkes said on a conference call that Time Warner will announce its plans for AOL's restructuring "very soon."

Wall Street sees the long-expected spin-off of AOL as a positive move strategically and financially.

"The best solution, in our opinion, is to spin off AOL in a tax-free transaction, which should remove some of the negative overhang caused by AOL on Time Warner's stock price," said Martin Pyykkonen, analyst at Wunderlich Securities.

Time Warner said it also notified Google Inc (GOOG.O) of its intention to buy back its 5 percent stake in AOL. Chief Financial Officer John Martin said the process could take a few months.

Bewkes completed the first major leg of his strategy to focus on content with the separation of its former cable unit, Time Warner Cable Inc (TWC.N) on March 12. The cable company also posted quarterly results on Wednesday.


Time Warner's income from continuing operations was roughly flat at $555 million, or 46 cents a share, in the first quarter, compared with $548 million, or 46 cents per share, a year earlier.

EPS excluding items was 45 cents, down from 48 cents a year ago but higher than the average analyst forecast of 39 cents, according to Reuters Estimates.

"The results were pretty good overall," said Thomas Eagan, analyst at Collins Stewart. "The revenue was better than we expected."

First-quarter revenue fell 7 percent to $6.9 billion, but it was higher than the average analyst forecast of $6.75 billion, according to Reuters Estimates.

CFO John Martin said the current quarter will be the "most challenging from a growth perspective," as the company is hurt by continuing weak ad revenue and poor home video sales.

Revenue at AOL fell 23 percent to $867 million, while revenue at Time Inc fell 23 percent to $806 million. Warner Bros revenue fell 7 percent to $2.6 billion, primarily due to lower DVD sales.

Revenue at the cable networks unit rose 6 percent to $2.8 billion, thanks to a 9 percent rise in subscription revenues which offset a 2 percent decline in advertising revenues.

"I felt that publishing was way worse than I expected but it was offset by networks, which was in line with our expectations," said Tuna Amobi, equity analyst at Standard & Poor's. "It's hard to see how the new content group can jump-start growth going forward." The company's earnings are more volatile without cable's steady cash flows, he added.

Time Warner affirmed its full-year 2009 outlook, saying its adjusted earnings per share would be flat with 2008 at around $1.98.

Shares of Time Warner rose 61 cents or 2.8 percent to $22.38 on the New York Stock Exchange. Disney rose $1.45 or 7.4 percent to $20.96 while Viacom rose $1.28 or 6.27 percent to $20.26.

(Reporting by Yinka Adegoke; Editing by Gerald E. McCormick and Tiffany Wu)